Australia’s booming property market is creating challenges for established and first time buyers alike due to the ongoing competitive conditions. To be a successful buyer in this market requires the right planning and strategy.
Australia’s booming property market
According to Corelogic, Australia’s property market has increased in value by 18.4% in the year to September 2021, largely due to historically low-interest rates which are fuelling demand growth. The price appreciation has been so strong that the IMF have recently warned the property boom is creating affordability and financial stability risks.
What to consider as a property buyer
So how do property buyers position themselves for success in this market? Being proactive is the key. Here are some proactive strategies which could help potential buyers with securing property:
- Secure pre-approval for the amount you want to borrow. A broker can help you calculate your borrowing power and streamline the pre-approval process for you.
- Put your name on real estate agent waiting lists in the area/s where you are looking to buy
- Be ready to put your best offer forward in an expression of interest scenario. Putting it forward early will help you stand out against the competition.
- Add a personal touch, such as a handwritten letter to your offer, to help connect with the sellers.
Knowing your finance options
Ensuring your financing is pre-approved is an important proactive strategy, as it’s often the most relevant benchmark when competing against other buyers. With that in mind, here are some important finance options to consider:
- Bridging loans – This type of loan is useful to fund a purchase before you have sold your existing home
- Fixed vs variable rate loans – Fixed-rate loans provide peace of mind that for a set period of time the interest rate is fixed, while variable-rate mortgages move up and down in line with official interest rates
- Interest only versus principal and interest loans – Interest-only loans are cheaper to service, while principal and interest loans help homeowners fully own their home in the longer term.
By clarifying which of these options is right for you, you’re improving your chances of having appropriate pre-approved financing in place ahead of most of the competition.
How to identify value during a boom
Finally, it’s worth asking how to identify value in a booming market. Successful property buyers generally consider a property’s long-term prospects, since property is a relatively illiquid asset class, and they also consider how future demand and supply of property in the local area is likely to evolve. Future property demand will be influenced by local attractions and the distance to employment centres, while property supply will be influenced by the amount of available space and the local building regulations. Buying in areas where demand growth is likely to exceed supply growth is an excellent way of identifying present value.
Being proactive is the key. As Australia’s property boom continues, positioning yourself to succeed in buying property requires careful planning and strategy. Ensuring you’re proactive with your financing is also likely to help buyers make their offers more compelling. Call your broker to discuss how they can help.
This information is for general information purposes only. The information contained herein does not constitute financial or professional advice or a recommendation. It has not been prepared with reference to your financial circumstances or business and should not be relied on as such. You should seek your own independent financial, legal and taxation advice as to whether or not this information is appropriate for you.